Correlation Between Charoen Pokphand and Sawit Sumbermas
Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and Sawit Sumbermas at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Charoen Pokphand and Sawit Sumbermas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charoen Pokphand Indonesia and Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Charoen Pokphand and Sawit Sumbermas and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Charoen Pokphand with a short position of Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Sawit Sumbermas.
Diversification Opportunities for Charoen Pokphand and Sawit Sumbermas
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Charoen and Sawit is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Indonesia and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana and Charoen Pokphand is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Charoen Pokphand Indonesia are associated (or correlated) with Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Sawit Sumbermas go up and down completely randomly.
Pair Corralation between Charoen Pokphand and Sawit Sumbermas
Assuming the 90 days trading horizon Charoen Pokphand Indonesia is expected to generate 1.28 times more return on investment than Sawit Sumbermas. However, Charoen Pokphand is 1.28 times more volatile than Sawit Sumbermas Sarana. It trades about -0.15 of its potential returns per unit of risk. Sawit Sumbermas Sarana is currently generating about -0.31 per unit of risk. If you would invest 512,500 in Charoen Pokphand Indonesia on August 28, 2024 and sell it today you would lose (40,500) from holding Charoen Pokphand Indonesia or give up 7.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charoen Pokphand Indonesia vs. Sawit Sumbermas Sarana
Performance |
| Timeline |
| Charoen Pokphand Ind |
| Sawit Sumbermas Sarana |
Charoen Pokphand and Sawit Sumbermas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charoen Pokphand and Sawit Sumbermas
The main advantage of trading using opposite Charoen Pokphand and Sawit Sumbermas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, Sawit Sumbermas can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sawit Sumbermas will offset losses from the drop in Sawit Sumbermas' long position.| Charoen Pokphand vs. Japfa Comfeed Indonesia | Charoen Pokphand vs. Kalbe Farma Tbk | Charoen Pokphand vs. PT Indofood Sukses | Charoen Pokphand vs. Semen Indonesia Persero |
| Sawit Sumbermas vs. Surya Citra Media | Sawit Sumbermas vs. Matahari Department Store | Sawit Sumbermas vs. Salim Ivomas Pratama | Sawit Sumbermas vs. Akr Corporindo Tbk |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
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